Three changes that could help exchange plans thrive

In 2014, the Affordable Care Act (ACA) and its associated public exchanges helped significantly reduce the number of uninsured people and their families in the U.S. The health insurance exchanges enabled millions of citizens to buy plans online from the comfort of their own homes.

But private insurance companies are currently reeling from losses-in the billions-from plans they sold to Americans through public exchanges. As a result, UnitedHealth Group is pulling out of several exchange markets, and Humana has announced that it might do the same. These departures would leave Obamacare insurance shoppers with fewer options to choose from during the next open enrollment period.

If insurance plans offered through the public exchanges are not profitable, then insurance companies simply won't offer them. As a result, plan choice will decrease on Obamacare health exchanges, unless something about the market, or its offerings, changes dramatically.

Here are a few changes that health plans on public exchanges might want to consider:

1. Design simple plans

Employer-based health insurance plans-about one in two Americans are covered by these plans-are bought and sold by professionals. Sales representatives, brokers, and HR managers work to assess and tweak plan parameters to craft the right plan for each employer; it’s their full-time job. Exchange plan buyers also do their homework when shopping for plans, but they are purchased by consumers whose jobs have nothing to do with health insurance.

But the current exchange-based plans are basically employer-based plans with varying levels of the features professionals use to craft their plans. Why design the same insurance product for a very different market and buyers? Instead of leaving exchanges because their products aren’t profitable in their current form, carriers could use this experience to innovate.

They could design simple plans that differ drastically from employer-based plans and provide exchange members with products that work better for them and are sustainably profitable as well. For instance, simple plans should use fewer parameters to create variances between plans, be different enough so that shoppers can clearly understand the difference between them, have fewer exceptions to the rules, and help members make tradeoffs that make sense and are easy to understand. They should also use simple language to describe what they do (and what they don’t), and what implications that has for consumers.

Next: Simplify and reduce health insurance jargon

2. Simplify and reduce health insurance jargon

The health insurance industry could be clearer about what plans do (and don't do), in plain, simple language. It should assume that people will expend only the minimum required level of effort to research health insurance plans.

The key takeaway here: How can customers avoid negative surprises? This is not about education or engagement; it’s about meeting people where they are and doing more than just providing information.

Knowing that even basic insurance terms like "claim" and "coverage" are jargon to most people, insurance companies can do more to simplify how they communicate with their customers.

3. Provide functional and emotional guidance

People trust guidance from experts. And they want not just functional support (guidance), but emotional support as well (tone). They want the kind of support and empathy they would provide their parent, child, or good friend if they were helping them shop for something important.

Health insurance companies that provide this type of two-pronged support system have a better chance of connecting with their customers and creating loyalty to their service.

Creating deeper, more comprehensive consumer profiles can give insurance companies a clearer picture of what is going on in their members’ lives, and can help insurance companies provide the right guidance for each member’s situation. And having a consistent service model for different consumer archetypes/personas can help insurance companies deliver information with the right tone to help consumers feel as if they’re being supported in their time of need.

Critical takeaway

While many Americans with Obamacare are satisfied with their insurance, issues still exist for both customers and insurance carriers. Consumers must still effectively self-insure with high deductible plans, and exchange plans are not profitable enough for some large carriers in many states.

Health insurance carriers should innovate their products and services for the very different market they’re serving, so that they can continue to provide access to care and support their bottom line in a sustainable, profitable way.

Yuhgo Yamaguchi is principal design strategist at Continuum.